I have never taken a motor to the dyno because we don't race on a dyno. I have seen the guys come out and tell me what the dyno said they made and I know it was better than what my motor put out. The ET slip said I had the better motor on track. As for dyno variances, yes they are better than the old days but I have seen the big number swing. Each dyno is different and will put out different numbers.
If you are basing your deal off the dyno number alone, the only fair thing to do is for Naylor to agree to step up and run the dyno. If it is sub par as to the agreement, then he should correct it. If it meets or is near the expected number, you have some apologies to make. Pretty simple solution.